Corruption costs a lot of money for citizens around the globe. The World Economic Forum and the World Bank estimates that corruption reduces global GDP by 5% ($2.6 trillion) per year with over $1 trillion paid in bribes. For businesses, corruption makes up 10% of the total cost of doing business and up to 25% of the cost of procurement contracts in emerging markets. This phenomenon is felt by the private sector in Indonesia.
According to Transparency International’s Corruption Perceptions Index 2014, which measures the perceived levels of public sector corruption, Indonesia was ranked 107th most corrupt nation out of 175 countries. While the government has been taking steps to improve the situation (for example in 2003, Corruption Eradication Commission, or KPK, was formed to combat political corruption), fighting corruption remains difficult and bribes are a widely accept part of doing business. And this is certainly the case for mid-sized companies in the oil and gas sector.
The industry is especially vulnerable to corruption due to the magnitude of money involved, as well as the licensing and procurement processes. Moreover, mid-sized companies are limited with resources and often face the dilemma of following cumbersome and bureaucratic licensing and procurement rules or paying bribes to get around them. Often enough, it is faster and cheaper to just pay the bribes, especially when competitors are also doing so. However, such behaviors are untenable for companies that are part of multinational companies’ value chains because they must abide by various legal frameworks, such as the U.S. Foreign Corrupt Practices Act and the UK Bribery Act.
To assist mid-size companies seeking to ethically do business and demonstrate their integrity, CIPE and Indonesia Business Links (IBL) developed a guide for small to mid-size suppliers of national and multinational companies in the oil and gas sector in Indonesia. The aim of the guide is to provide best practices for overcoming common challenges in adhering to anti-corruption compliance, making it easier for suppliers and distributors in the oil and gas industry to combat corruption in their operations.
By exchanging knowledge and helping mid-sized companies in the oil and gas sector develop stronger compliance systems, CIPE and IBL hopes to help local companies become globally competitive. Access the full guide here.
Maiko Nakagaki is a Program Officer for Global Programs at CIPE.